The lesson your class was supposed to learn is that people aren't always rational. Did they?

(And did your economics class then go on to assume everyone is perfectly rational and understands their own utility functions, anyway?)

Rational doesn't mean valuing every dollar exactly the same. Buying a $1 for more than $1 from an economics professor is funny, maybe a good story, maybe a good keepsake, and plausibly worth more in utility than what they paid.

Was it a Dollar Auction? Because if so there is a little more nuance than you're implying.

https://en.wikipedia.org/wiki/Dollar_auction

"players are compelled to make an ultimately irrational decision based completely on a sequence of apparently rational choices made throughout the game."